PSE raises ante for equities depository

MANILA, Philippines—The Philippine Stock Exchange plans to build up the authorized capital base of wholly owned clearinghouse subsidiary Securities Clearing Corp. of the Philippines (SCCP) to P500 million as the latter is set to take on additional responsibility as an equities depository.

The boards of both PSE and SCCP recently approved the increase in the latter’s capital stock, currently at P125 million. Of the P375 million capital hike, the PSE will subscribe to an additional P156 million, thereby accounting for a total of P250 million subscribed capital stock of SCCP, the exchange said in a disclosure.

“PSE will pay an additional P106 million bringing SCCP’s total paid-up capital to P200 million to support SCCP’s depository operation,” the PSE said.

The increase in capital stock and the corresponding amendment in the bylaws will be ratified in the annual stockholders’ meeting of SCCP this year, it added.

The Securities and Exchange Commission recently granted the SCCP a provisional license to operate a securities depository, subject to the fulfillment of certain conditions and other requirements, including an increase in capital.

The SCCP’s planned operation of its own securities depository signals a break from the depository platform of the Philippine Dealing System (PDS) Group, which currently handles both equities and fixed income depository through Philippine Depository & Trust Corp. (PDTC).

PSE president Hans Sicat said SCCP’s adoption of a depository function would help promote efficiencies in the market. “Systemic risks can also be further minimized when the backroom processes for equities trading are consolidated within the PSE,” he said.

But PDS vehemently opposed the creation of a separate depository platform for equities. “We believe a multidepository model that specifies the issuer as the designated entity which chooses the depository for a particular security gravely compromises investor protection and, to a great degree, presents conflict of interest between the issuer and the depository,” PDS said in a briefer.

“A depository exercises fiduciary responsibilities on behalf of the investor (or its agent) for shares which it needs to exercise pre- and post-settlement. The choice of the depository cannot be relegated to anyone other than the investor or its proper agent without compromising the relationship between the investor and the depository. Having contemplated the pre-eminence of the public good specifically of the investors-at-large, which the regulating authority should protect, a multidepository framework that is issuer-centric may endanger and render moot the governance pursuits of a free, transparent and orderly capital markets.”

The PSE, on the other hand, has already secured the support of market players and business leaders on its plan to set up a separate securities depository under SCCP.—Doris C. Dumlao